[Mb-civic] Capitalism Vs. Democracy - Robert J. Samuelson - Washington Post

[William Swiggard]

Capitalism Vs. Democracy

By Robert J. Samuelson
Wednesday, September 28, 2005; Page A21

The recent German and Japanese elections deserve more attention than 
they've received because they illustrate the uneasy relationship between 
capitalism and democracy. Capitalism thrives on change -- it inspires 
new technologies, products and profit opportunities. Democracy resists 
change -- it creates powerful constituencies with a stake in the status quo.

Capitalism (by which I mean an economic system that relies heavily on 
markets and private ownership) and democracy need each other. The one 
generates rising living standards; the other cushions capitalism's 
injustices and thereby anchors public support. But this mutual 
dependence is tricky, because if democratic prerogatives are overused, 
they may strangle capitalism.

Just how to regulate this relationship was the core election issue in 
both Japan and Germany. As is well known, their economies have faltered 
badly. Since 1997 their annual economic growth has averaged about 1 
percent, roughly a third of the U.S. rate. Compared with the late 1980s, 
Japan's joblessness has doubled; in Germany, the unemployment rate has 
bounced around 10 percent for a decade. The campaigns centered on these 
setbacks.

Voters seemed to reach opposite conclusions. The Japanese gave a 
resounding triumph to Prime Minister Junichiro Koizumi, who made the 
election a test of his economic reform agenda. By contrast, German 
voters seemed more timid. The pre-election wisdom was that Chancellor 
Gerhard Schroeder of the Social Democratic Party (SPD) would lose 
decisively to Angela Merkel of the Christian Democratic Union (CDU), who 
preached aggressive economic reform. The two parties actually ran almost 
even. The CDU got 35.2 percent of the vote, the SPD 34.3 percent. It's 
unclear who will head the next government.

Despite the divergent outcomes, the prospects for economic renewal in 
both countries remain uncertain. Proclaiming economic "reform" and 
carrying it out aren't the same. In Japan, Koizumi has championed 
overhauling Japan Post, which is more than a mail system. It's also the 
world's largest bank, absorbing as deposits about 30 percent of Japanese 
household savings. The trouble, says Richard Katz, editor of the 
Oriental Economist Report, is that much of this money is wasted. It's 
funneled into government bonds that often finance dubious public works 
projects -- bridges to nowhere and paved riverbeds, as Katz puts it.

http://www.washingtonpost.com/wp-dyn/content/article/2005/09/27/AR2005092701526.html?nav=hcmodule
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